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Comparing Returns Against the Markets

Posted on the 18 October 2017 by Smallivy

This has definitely been a great time for stocks. Ever since the election in 2016, stocks have been heading up. The Dow Jones Industrial Average, an index often used to judge the returns fo the markets, has risen about 25% since election day. The S&P 500 index, a common index used to determine the performance of large US stocks, is up about 15% (16.7% if you reinvested dividends).

While I'm only really interested in long-term returns, I still like to periodically review how I am doing against the major indices to get some perspective. I tend to invest a good portion of my money in individual stocks that I think will do well over long periods of time. If I were to consistently get lower returns than I would have just investing in index funds, I might just shift to index funds since that would be simple and require very little effort. In the very least, I might rethink how I invest and in what I invest in.

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Comparing Returns Against Markets

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Comparing Returns Against Markets
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Looking at the returns of the S&P500, I see that it has returned 14.32% since the start of the year. Over a 1 year period, it has returned about 15.7%. Looking at my IRA account, it has increased by about 18% since the start of the year and 31% over a 1-year period. I have a second account that unfortunately hasn't done quite as well, rising 12% since the start of the year and about 19% over a 1-year period. It is outpacing the returns of the S&P 500 for the full year but lagging a bit year-to-date. The Russell 2000 has returned 10.3% year-to-date, so the smaller stocks have not been doing as well as the larger companies.

Comparing Returns Against the Markets

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Comparing Returns Against Markets
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I'm investing long-term, so returns for a short period aren't as important as the financial performance of the companies I own in general. I believe that if I pick stocks that consistently see earnings grow in the 12-15% per year rate, I should see returns on that order over long periods of time. Sometimes the price will fluctuate up or down due to other, unrelated factors, but eventually the stock price will return to the fair value dictated by the earnings and dividend growth of the company.

Comparing Returns Against the Markets
Comparing Returns Against Markets

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Comparing Returns Against Markets

Note, a great site to determine the return of the S&P 500 for any given period is at: https://dqydj.com/sp-500-return-calculator/ . The nice thing about this calculator is that you can pick any period you want, and it also includes the effect of reinvesting dividends. If that is included, my returns look even worse since the S&P 500 return with dividends reinvested is 8.3%.

Have a question? Please leave it in a comment. Follow me on Twitter to get news about new articles and find out what I'm investing in. @SmallIvy_SI

Comparing Returns Against Markets

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.


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